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FINANCIAL REPORTSTENA AB 2016
Cover: Stena’s vessels sail the equivalent of approx-imately 270 circuits of the earth each year to deliver raw material, goods and passengers. The cover picture shows a vessel owned by Stena Bulk, one of the world´s leading tanker operators.
Read more about Stena AB’s operations and sustainability work in the annual review and the sustainability report. Printed versions can be ordered from birgitta.sandh@stena.com.
STENA.COM
CONTENTS
DIRECTORS’ REPORT 2
GROUP
CONSOLIDATED INCOME STATEMENT 8
CONSOLIDATED STATEMENT OFCOMPREHENSIVE INCOME 9
CONSOLIDATED BALANCE SHEET 10
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 12
CONSOLIDATED STATEMENT OF CASH FLOWS 13
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 14
PARENT COMPANY
INCOME STATEMENT 70
BALANCE SHEET 71
STATEMENT OF CHANGES IN EQUITY 72
STATEMENT OF CASH FLOWS 72
NOTES TO THE FINANCIAL STATEMENTS 73
PROPOSED TREATMENT OF THE UNAPPROPRIATED EARNING 77
AUDIT REPORT 78
FIVE-YEAR SUMMARY 80
http://www.stena.com/en/Pages/default.aspx
STENA AB FINANCIAL REPORT 2016 1
2 STENA AB FINANCIAL REPORT 2016
DIRECTORS’ REPORT
DIRECTORS’ REPORTGeneral information about the business
The Stena Group is one of the largest family-owned compa-
nies in Sweden and has operations in fi ve business areas: Ferry
Operations, Offshore Drilling, Shipping, Property and New
Businesses.
Ferry Operations, one of the world’s largest international
passenger and freight service enterprises, are run by Stena Line
in Scandinavia, the North Sea, the Irish Sea and the Baltic Sea.
Offshore Drilling, using semi-submersible drilling rigs and
drillships, is run by Stena Drilling from its head offi ce in
Aberdeen in Scotland and through its global organisation with
offi ces in the USA, Norway, Cyprus, Luxembourg, Korea and
Australia.
Shipping operations are run by Stena RoRo in the RoRo and
RoPax ferry market and by Stena Bulk in the tanker market and
LNG (Liquefi ed Natural Gas) market. Stena RoRo has its head
offi ce in Gothenburg. Stena Bulk has its head offi ce in Gothen-
burg as well as offi ces in Houston, Singapore and Limassol.
Shipping operations also include the manning of ships via
Northern Marine Group, which has its head offi ce in Glasgow,
as well as offi ces in Manila, Mumbai, Singapore, Shanghai,
St Petersburg, Gothenburg, Houston and Aberdeen. Stena
Teknik in Gothenburg is responsible for technical development.
Stena Property, with its head offi ce in Gothenburg, mainly
owns properties in Gothenburg, Stockholm and Malmö, and is
one of Sweden’s largest privately owned property companies.
The international property division, based in Amsterdam, has
property holdings in the Netherlands, France, Luxembourg,
Hungary, the USA and the United Kingdom.
New Businesses is run by Stena Adactum, based in Gothen-
burg. Stena adactum invests in companies that fall outside
Stena’s traditional core operations. The portfolio currently
includes Ballingslöv, S-Invest, Envac and Stena Renewable as
well as the associates Gunnebo, Midsona and Svedbergs.
Stena Finance, which is the central fi nance department of the
Group, has operations in Gothenburg, Luxembourg, Limassol,
Zug, Amsterdam, London and Singapore.
The parent company of the Group is Stena AB (publ), com-
pany registration number 556001-0802. The parent company
is a limited liability company and has its registered offi ce in
Gothenburg, Sweden. The address of the head offi ce is
Masthuggskajen, SE-405 19 Gothenburg.
The year in brief
• Another year with good performance by all business areas.
• Continuing strong earnings.
– Total income amounted to SEK 34.8 billion, compared
with SEK 36.4 billion in 2015.
– EEBITDA (operating profi t before depreciation), excluding
valuation of our investment properties and sales of
non-current assets, amounted to SEK 9.0 billion, compared
with SEK 9.4 billion in 2015.
– EBITDA was in line with the previous year, mainly as a
result of improvements in ferry operations during the year,
while drilling and shipping operations have shown a
decline due to the challenging market situation they face.
– Profi t before tax was SEK 2.3 billion, compared with SEK
4.5 billion in 2015, including sales of non-current assets
amounting to MSEK 474 and SEK 2.3 billion, respectively.
• A healthy balance sheet with an equity ratio of 38% as at
31 December 2016.
• Stena Line improved its earnings compared with 2015. This
was achieved by increasing volumes, cost reduction meas-
ures, tonnage changes, lower bunker costs and continuing
improvements in existing operations.
• Stena Drilling was in line with the previous year. The average
commercial utilisation rate was just over 94%. During the
year, Stena Drilling has focused on the cost reduction pro-
gramme that has been implemented to address the current
market situation.
• Stena Bulk experienced a year of varying earnings, but
maintained a good utilisation rate for both the tanker and
the LNG segment during the year.
• Stena RoRo reported a continued high utilisation rate during
the year and also worked on chartering in and out vessels
for Stena Line, and selling vessels no longer needed in Stena
Line’s operations.
• Stena Property continued to be profi table, with a very high
average occupancy rate of around 96%.
• Stena Adactum had another successful year in the portfolio
companies and reported sales growth in all companies
except Stena Renewable.
Signifi cant business events 2016
Ferry Operations
The vessel M/S Trelleborg was sold in February 2016.
In April, a contract was signed to build four new RoPax
vessels, with an option for a further four vessels. Deliveries
are scheduled for 2019 and 2020. The vessels will be built
at the AVIC Shipyard in China.
In December 2016, an agreement was reached on the
acquisition of the chartered vessel M/S Mecklenburg
Vorpommern from Postbank Leasing GmbH.
STENA AB FINANCIAL REPORT 2016 3
Offshore Drilling
On 14 January 2016, Stena Drilling Ltd., Aberdeen, received a
ruling by the Oslo District Court regarding potential capital
gains tax in Norway following the divestment of the Stena Dee
drilling rig in 2006. The court ruled entirely in accordance with
the claims presented by the company, and the Norwegian Tax
Agency decided not to appeal the ruling, which has now
taken legal effect.
During the third quarter of 2016, the drillship Stena IceMAX
was written down by MUSD 160 to its recoverable amount,
which corresponded to the projected value in use at the time.
In October 2016, the Norwegian oil company Statoil gave
notice of early termination of the contract for the drilling unit
Stena Don. The original contract was due to expire in early
February 2017. Statoil paid a termination penalty, and the
outcome of this early termination will have a neutral effect on
EBITDA.
In November, Stena Drilling signed an agreement with Cairn
Energy on drilling for 130 days, plus options, off Senegal, with
the drillship Stena DrillMAX.
In November, Stena Drilling signed a contract with Provi-
dence Resources PLC for the drillship Stena IceMAX to drill off
Ireland for 60 to 90 days, plus options.
In December 2016, Stena Drilling signed a borehole contract
with Repsol Sinopec for the drilling unit Stena Spey, starting in
April 2017. The unit has been warm stacked since the EnQuest
assignment ended in mid November.
Delivery of the Stena MidMAX, a semi-submersible drilling
rig for harsh environments, was scheduled for March 2016 but
its construction has been substantially delayed. The rig is now
expected to be completed mid-2018. The builder, Samsung
Heavy Industries and Stena Drilling are in discussions regarding
the implications of this delay.
Shipping – Stena Bulk
Four new IMOIIMAX vessels were delivered from a shipyard in
China in 2016. After the latest delivery in March 2017, Stena
Weco is now operating a total of ten IMOIIMAX vessels. A
further three sister ships will be delivered.
During the year, Stena Weco established a new offi ce in
Dubai to meet increased demand in the region.
Shipping – Stena RoRo
In February 2016, the vessel Highlanders was delivered to
Marine Atlantic Inc., which had exercised its purchase option
in the previous year.
Shipping – Northern Marine Group
In May 2016, Northern Marine Group acquired Clyde Group
Ltd, further strengthening the company’s product portfolio in
offshore and marine training.
New businesses
In September, Stena Adactum signed a letter of intent regard-
ing acquisition of 26% of the listed bathroom company
Svedbergs i Dalstorp AB for approximately MSEK 200. At the
same time, it was decided that Ballingslöv would sell the assets
of its bathroom company Macro International AB to Svedbergs
i Dalstorp AB for approximately MSEK 180. These transactions
were conducted in December 2016.
Stena Adactum had another successful year and continued
to develop and expand its operations.
Property
Stena Property acquired 1,225 apartments in Landskrona in
Sweden during the year. The properties were taken over on
30 December 2016.
The property Krabban 1 in Mölndal was taken over on 15
December 2016 and is now the head offi ce of SCA Hygiene
Products. The property consists of 25,000 m2 of offi ces and a
laboratory.
In 2016, three properties were sold in Danderyd, one prop-
erty was sold in Mölndal, while two properties were sold to
housing associations in Lund.
The economic occupancy rate was 95.5% at the end of
December 2016. In Sweden, the economic occupancy rate was
99.4% for residential premises and 96,2% for commercial
premises. Internationally the economic occupancy rate was
83.3%.
Other
During the second quarter, Stena acquired IL Recycling AB, a
supplier of recycling services, with operations in Sweden and
Poland. IL Recycling AB has 700 employees and a turnover of
approximately SEK 2 billion. The acquisition took effect on 30
June 2016. The Polish operations were sold to Stena Recycling
AB in November 2016.
Subsequent events
On 1 March 2017, the remaining recycling operations, which
were included in the IL Recycling AB acquisition, were sold to
Stena Recycling AB. Other operations, mainly property, remain
with the Stena AB Group.
4 STENA AB FINANCIAL REPORT 2016
DIRECTORS’ REPORT
In December 2016, an agreement was reached on the
acquisition of the chartered vessel M/S Mecklenburg Vorpom-
mern from Postbank Leasing GmbH. Stena Line GmbH
acquired the vessel on 14 March 2017 and the vessel was sold
on to Havgalleskären AB on the same day. The new owner,
Havgalleskären AB, is chartering back the vessel to Stena Line
GmbH on a fi ve-year bareboat charter.
In March 2017, a commercial property of 35,000 m2 was
sold in Haninge in Stockholm.
In April 2017, Stena Bulk acquired the remaining 50% of the
shares in Stena Weco A/S from its partner WECO Shipping.
This means that Stena Weco A/S is now a wholly-owned
subsidiary of Stena Bulk Denmark ApS.
System for internal control and risk management
regarding fi nancial reporting
This description of Stena’s internal control and risk manage-
ment regarding fi nancial reporting has been prepared in
accordance with the Swedish Annual Accounts Act.
The Board of Directors is responsible for the company’s
internal control, the overall aim of which is to safeguard the
company’s assets and thereby its shareholders’ investment.
Stena uses the COSO framework as a basis for internal con-
trol over fi nancial reporting. The COSO framework, which is
issued by the Committee of Sponsoring Organisations of the
Treadway Commission, is made up of fi ve components; control
environment, risk assessment, control activities, information
and communication as well as monitoring. The COSO frame-
work was implemented in 2007 when the Stena AB Group
reported in accordance with the US “Sarbanes-Oxley Act 404”
for the fi rst time. When the bond was repaid on 5 March
2013, the Stena AB Group was deregistered from SEC and
is no longer required to report in accordance with the
Sarbanes-Oxley Act 404. Stena has, however, kept the COSO
framework as guidelines for work on internal control over
fi nancial reporting.
Control environment
The Board of Directors have overall responsibility for internal
control over fi nancial reporting. The control environment
forms the basis of internal control, as it includes the culture
that the Board and management communicate and by which
they work. The control environment is made up primarily of
integrity, ethical values, expertise, management philosophy,
organisational structure, responsibility and authority, policies
and guidelines as well as routines.
It is of particular importance that management documents,
such as internal policies and guidelines exist in signifi cant areas
and that these provide employees with solid guidance. Exam-
ples of important policies and guidelines within Stena are
“Code of Conduct”, “Power Reserved List”, “Principles, con-
victions and basic values for Stena AB”, “Finance Policy” and
“Financial Manual” which defi ne the accounting and reporting
regulations.
These policies and guidelines have been made available to
all relevant employees through established information and
communication channels.
Furthermore, the Board has appointed an Audit Committee,
whose primary task is to ensure that established principles for
fi nancial reporting and internal control are complied with and
that appropriate relations are maintained with the company’s
auditors.
Risk Assessment
Stena carries out regular risk assessments in order to review
the risks of errors within its fi nancial reporting. The risk assess-
ment of fi nancial reporting aims to identify and evaluate the
most signifi cant risks that affect internal control over fi nancial
reporting in the Group’s companies and processes.
During the year, the Group’s overall risk assessment was
continued updated in order to obtain a general idea of the
main risks. To limit risks there are appropriate policies and
guidelines as well as processes and control activities within the
business. The risk assessment is updated on an annual basis
under the direction of the Corporate Governance staff func-
tion and the results are reported to the Audit Committee.
Control activities
The most signifi cant risks identifi ed regarding fi nancial report-
ing are managed through various control activities. There are a
number of control activities built into every process to ensure
that the business is run effectively and that fi nancial reporting
provides a true and fair view.
The control activities, which aim to prevent, fi nd and correct
potential inaccuracies, include account reconciliations, authori-
sations, and monthly accounts as well as analysis of these.
IT systems are scrutinised regularly during the year to ensure
the validity of Stena’s IT systems with respect to fi nancial
reporting.
Information and communication
Policies and guidelines are of particular importance for accu-
rate accounting and reporting and also defi ne the control
activities to be carried out. Stena’s policies and guidelines
relating to fi nancial reporting are updated on an ongoing
basis and are available on Stena’s intranet for all employees
concerned. Information and communication relating to fi nan-
cial reporting is also provided through training. The Group
STENA AB FINANCIAL REPORT 2016 5
holds internal seminars and conferences regularly, with a focus
on quality assurance in fi nancial reporting and governance
models.
Monitoring
The Board of Directors and the Audit Committee continuously
evaluate the information provided by the executive manage-
ment team, including information on internal control.
The Audit Committee’s task of monitoring the effi ciency of
internal control by the management team is of particular inter-
est to the Board. This work includes checking that steps are
taken with respect to any problems detected and suggestions
made during the assessment by the external and internal audi-
tors. The work on internal control during the year has further
increased awareness of internal control within the Group and
improvements are being made on continuous basis.
Internal audit
The Group’s Corporate Governance staff function works as
the Group’s internal audit function and reports to the Audit
Committee and the deputy CEO. The function focuses on pro-
actively developing and enhancing internal control over fi nan-
cial reporting as well as examining the effectiveness of internal
control. The Corporate Governance function plans the work in
consultation with the Audit Committee and regularly reports
the fi ndings of its examinations to the Committee. The unit
communicates continuously with Stena’s external auditors on
matters concerning internal control.
Shareholders
All of the issued and outstanding voting shares of Stena AB
were owned as following as at 31 December 2016:
Name of benefi cial ownerNumber of
sharesPercentage ownership
Dan Sten Olsson 25,500 51.0
Stefan Sten Olsson 12,250 24.5
Madeleine Olsson Eriksson 6,250 12.5
Gustav Eriksson 3,000 6.0
Marie Eriksson 3,000 6.0
The holders listed above have sole voting and investment
power over the shares benefi cially owned by them. Dan Sten
Olsson, Stefan Sten Olsson and Madeleine Olsson Eriksson
are siblings. Gustav Eriksson is the son of Madeleine Olsson
Eriksson and Marie Eriksson is the daughter of Madeleine
Olsson Eriksson. Dan Sten Olsson is the only offi cer or director
of Stena AB who owns any voting shares of Stena AB. All
shares of Stena AB have the same voting rights.
Future developments
The Group’s overall business is expected to continue in the
same direction over the coming year and to the same extent
as in 2016.
Research and development
The Group executes vessel construction development via Stena
Teknik. The Group also makes payments to universities and
the Sten A. Olsson Foundation for Research and Culture, the
aims of which include promoting scientifi c research and devel-
opment.
Environment
The Group conducts several environment-related projects for
the purpose of reducing our general environmental impact.
Since shipping comprises a large part of Stena’s activities, one
of our major challenges is to develop more effi cient vessels.
The most important measure for Stena’s shipping divisions is
to reduce energy consumption in relation to work performed.
An environmental approach is also fundamental for Stena
Fastigheter and encompasses consideration for the tenants
and safeguarding of the world’s limited resources. The initia-
tive to reduce energy consumption continues and targets have
been set for each building.
Since implementation of the Environmental Code, the port
operation run by Stena Line Scandinavia AB has become
subject to permit requirements, primarily relating to noise.
Financial risks
For fi nancial risks, see Note 1 Summary of signifi cant account-
ing policies and Note 31 Financial risk factors and fi nancial risk
management.
Employees
In 2016, the average number of employees was 11,183, com-
pared with 10,416 on 31 December 2015. A vital factor for
realising Stena Group’s vision is its employees, their expertise,
enthusiasm and skills.
Future development depends on the company retaining its
position as an attractive employer. To support this goal, the
company strives for a working climate where energy, passion
and respect for the individual are the guiding principles.
A Group-wide attitude survey is carried out regularly and
the number of satisfi ed employees is rising steadily. Every
employee must attend a career development meeting once
a year. For more information about employees see Note 33.
6 STENA AB FINANCIAL REPORT 2016
DIRECTORS’ REPORT
Income and profi t
Consolidated income for 2016 was MSEK 34,799 (36,417),
including profi t on the sale of vessels totalling MSEK 303
(502), property sales totalling MSEK 81 (102) and sale of
operations totalling MSEK 90 (1,675). Profi t before tax for
the year was MSEK 2,262 (4,504) and net profi t was MSEK
2,518 (3,988).
Financing and liquidity
At 31 December 2016, cash and cash equivalents and current
investments totalled MSEK 2,216 (3,172), of which MSEK 1,591
(2,516) were available. Together with non-current investments
and available credit facilities, the total payment capacity at 31
December 2016 was SEK 19.1 (25.9) billion.
Of the credit facility of MUSD 800, MUSD 58 (5) were
utilised at 31 December 2016, of which MUSD 3 (5) were
related to issued guarantees. Loan repayments during the year
amounted to MSEK 3,044 (3,842). During the fi rst quarter of
2016, the company terminated the credit facility of MSEK
6,660 secured by a guarantee issued by the Swedish Export
Credits Guarantee Board (EKN) at its own request.
Consolidated total assets at 31 December 2016 amounted
to MSEK 123,699, compared with MSEK 119,268 at 31
December 2015. Investments in property, plant and equipment
and intangible assets during the year amounted to MSEK
7,200 (5,927).
The consolidated debt/equity ratio, defi ned as net inter-
est-bearing debt in relation to net interest-bearing liabilities,
equity and deferred tax liabilities, was 49% (50%) at 31
December 2016.
According to the consolidated balance sheet as at 31
December 2016, retained earnings amounted to MSEK 42,801,
of which MSEK 2,531 comprised net profi t for the year.
The Stena AB Group has during 2016 repurchased MUSD 73
of the MUSD 600 unsecured bond maturing 2024. Stena AB
and its affi liates may from time to time repurchase or other-
wise trade in its own bonds in open market transactions.
Parent company
The Parent company’s revenue totalled MSEK 134 (162), while
profi t before tax was MSEK 1,566 (4,023), of which dividends
from subsidiaries totalled MSEK 2,395 (3,731).
The Board of Directors of Stena AB proposes that MSEK 205
(405) be paid as a dividend to the shareholders whereupon
the remaining profi t, of MSEK 18,269, will be carried forward.
Details of the fi nancial performance, liquidity and fi nancial
position in general for the Group and the Parent company can
be found in the following income statements, balance sheets,
cash fl ow statements and accompanying notes.
STENA AB FINANCIAL REPORT 2016 7
GROUP
8 STENA AB FINANCIAL REPORT 2016
GROUP CONSOLIDATED INCOME STATEMENT
1 January–31 December
2015 2016Note MSEK MSEK
Revenue
Ferry Operations 12,491 12,592
Offshore Drilling 7,891 7,360
Shipping 3,623 2,750
Property 2,515 2,554
New Businesses 6,752 6,734
Other 117 832
Total revenue 33,389 32,822
Net result on sale of non-current assets 4 2,279 474
Total other income 2,279 474
Change in fair value of investment properties 12 749 1,503
Total income 3 36,417 34,799
Direct operating expenses
Ferry Operations –9,272 –8,737
Offshore Drilling –3,209 –2,919
Shipping –1,503 –1,545
Property –820 –867
New Businesses –4,940 –4,962
Other –69 –420
Total direct operating expenses –19,813 –19,450
Gross profi t 16,604 15,349
Selling expenses –1,414 –1,359
Administrative expenses 5 –2,793 –2,966
Depreciation, amortisation and impairment 3, 9, 10, 11 –5,596 –7,011
Operating profi t 3 6,801 4,013
Result from investments in strategic associates 6 60 66
Dividends received 136 114
Result on sale of securities –35 387
Interest income 213 277
Interest expenses –2,431 –2,385
Exchange gains/losses 81 13
Other fi nance income/costs –321 –223
Financial net 7 –2,297 –1,751
Profi t before tax 4,504 2,262
Income taxes 8 –516 256
Profi t for the year 3,988 2,518
Profi t for the year attributable to:
Shareholders of the Parent company 3,990 2,531
Non-controlling interests –2 –13
Profi t for the year 3,988 2,518
STENA AB FINANCIAL REPORT 2016 9
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
1 January–31 December
2015 2016Note MSEK MSEK
Profi t for the year 3,988 2,518
Other comprehensive income 19
Items that may subsequently be reclassifi ed to profi t or loss:
Change in fair value reserve for the year, net of tax –72 344
Change in net investment hedge for the year, net of tax 179 336
Share of other comprehensive income of associates –67 84
Change in translation reserve for the year 325 988
Items that will not be reclassifi ed to profi t or loss:
Remeasurements of post-employment benefi t obligations 73 –484
Change in revaluation reserve for the year 409 –110
Share of other comprehensive income of associates 16 –31
Other comprehensive income 863 1,127
Total comprehensive income 4,851 3,645
Total comprehensive income attributable to:
Shareholders of the Parent company 4,858 3,657
Non-controlling interests –7 –12
Total comprehensive income for the year, net of tax 4,851 3,645
GROUP
10 STENA AB FINANCIAL REPORT 2016
GROUP CONSOLIDATED BALANCE SHEET
31 December
2015 2016Note MSEK MSEK
Assets
Non-current assets
Intangible assets 9
Goodwill 1,942 2,032
Trademarks 702 706
Rights to routes 695 631
Other intangible assets 361 402
Total intangible assets 3,700 3,771
Property, plant and equipment
Vessels 10 46,398 43,064
Construction in progress 10 4,331 5,972
Windmills 10 2,268 2,380
Equipment 10 1,902 1,702
Land and buildings 10 1,087 1,244
Ports 11 4,054 3,659
Total property, plant and equipment 60,040 58,021
Investment properties 12 30,617 35,466
Financial assets
Investments reported according to the equity method 6 1,701 2,308
Marketable securities 13 6,332 7,253
Surplus in funded pension plans 21 395 264
Other non-current assets 14, 20 5,307 4,661
Total fi nancial assets 13,735 14,486
Total non-current assets 108,092 111,744
Current assets
Inventories 15 747 905
Trade receivables 16 2,288 2,847
Other current receivables 16 2,675 2,476
Prepayments and accrued income 16 2,294 2,095
Short-term investments 17 861 894
Cash and cash equivalents 18 2,311 1,322
Assets held for sale 27 1,416
Total current assets 11,176 11,955
Total assets 3 119,268 123,699
STENA AB FINANCIAL REPORT 2016 11
31 December
2015 2016Note MSEK MSEK
Equity and liabilities
Equity
Share capital 5 5
Reserves 19 2,112 3,627
Retained earnings 37,094 40,270
Profi t for the year 3,990 2,531
Equity attributable to shareholders of the Parent company 43,201 46,433
Non-controlling interests 112 100
Total equity 43,313 46,533
Non-current liabilities
Deferred tax liabilities 20 4,686 4,623
Pension liabilities 21 571 611
Other provisions 635 670
Long-term debt 22 40,937 43,318
Senior Notes 23 13,493 10,878
Capitalised lease obligations 24 420 70
Other non-current liabilities 25 3,193 2,489
Total non-current liabilities 63,935 62,659
Current liabilities
Short-term debt 22 2,201 2,100
Senior Notes 23 2,702
Capitalised lease obligations 24 39 11
Trade payables 1,598 1,647
Tax liabilities 88 74
Other liabilities 3,225 2,294
Accruals and deferred income 26 4,869 4,860
Liabilities directly attributable to assets classifi ed as held for sale 27 819
Total current liabilities 12,020 14,507
Total equity and liabilities 119,268 123,699
GROUP
12 STENA AB FINANCIAL REPORT 2016
GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity attributable to shareholders of the Parent company
MSEKShare
capital Reserves1)
Retained earnings
including Profi t for the
year Total
Non-controlling
interests Total equity
Closing balance, 1 January 2015 5 1,187 37,396 38,588 234 38,821
Change in fair value reserve for the year –72 –72 –72
Change in net investment hedge for the year 179 179 179
Change in revaluation reserve for the year 488 –79 409 409
Change in translation reserve for the year 330 330 –5 325
Change in associates for the year –51 –51 –51
Remeasurement of post-employment benefi t obligation 73 73 73
Other comprehensive income 925 –57 868 –5 863
Profi t for the year 3,990 3,990 –2 3,988
Total comprehensive income 925 3,933 4,858 –7 4,851
Dividend –225 –225 –225
Dividend to foundation –19 –19 –19
Acquisition/Disposal of non-controlling interests –115 –115
Closing balance, 31 December 2015 5 2,112 41,085 43,201 112 43,313
Change in fair value reserve for the year 344 344 344
Change in net investment hedge for the year 336 336 1 337
Change in revaluation reserve for the year –152 42 –110 –110
Change in translation reserve for the year 988 988 988
Change in associates for the year 52 52 52
Remeasurement of post-employment benefi t obligation –484 –484 –484
Other comprehensive income 1,516 –390 1,126 1 1,127
Profi t for the year 2,531 2,531 –13 2,518
Total comprehensive income 1,516 2,141 3,657 –12 3,645
Dividend –405 –405 –405
Dividend to foundation –20 –20 –20
Acquisition/Disposal of non-controlling interests
Closing balance, 31 December 2016 5 3,627 42,801 46,433 100 46,533
1) See also note 19
STENA AB FINANCIAL REPORT 2016 13
GROUP CONSOLIDATED STATEMENT OF CASH FLOWS
1 January–31 December
2015 2016Note MSEK MSEK
Cash fl ow from operating activities
Profi t for the year 3,988 2,518
Adjustmets to reconcile profi t for the year to net cash provided by operating activities:
Depreciation, amortisation and impairment 3 5,596 7,011
Change in fair value of investment properties –749 –1,503
Share of strategic associates result –60 –66
Gain on sale of non-current assets 4 –2,279 –474
Gains/losses on sale of securities net 35 –387
Exchange differences, unrealised –888 –175
Deferred income taxes 223 –230
Other non-cash items 718 –52
Pensions –232 –395
Dividends from operational associates 229 131
Investments and disposals of operational associates –62 –155
Net cash fl ow from trading securities 100 –36
Cash fl ow from operating activities before changes in working capital 6,619 6,187
Changes in working capital
Trade and other receivables 393 –379
Prepayments and accrued income 118 27
Inventories 85 –152
Trade payables –138 –13
Accruals and deferred income –1,286 –772
Income tax payable –168 –239
Other current liabilities 60 179
Cash fl ow from operating activities 5,683 4,838
Investing activities
Capital expenditure on intangible assets –109 –121
Sale of property, plant and equipment 4 3,031 2,710
Capital expenditure on property, plant and equipment –5,755 –7,055
Purchase of operations, net of cash acquired 29 –1,332 –722
Sale of operations, net of cash sold companies 29 2,379 273
Dividends from strategic associates 26 28
Investments and disposals of strategic associates –38 –310
Sale of securities 2,865 2,861
Purchase of securities –3,533 –2,432
Increase in other non-current assets –117 –336
Decrease in other non-current assets 51 83
Other investing activities 30 1,024 –3
Cash fl ow from investing activities –1,509 –5,024
Financing activities
Proceeds from issuance of short and long-term debt 4,762 2,453
Principal payments on short and long-term debt –3,842 –3,044
Net change in borrowings on line-of-credit agreements –5,824 410
Principal payments on capitalised lease obligations –177 –55
Net change in restricted cash accounts –37 –28
Dividends –244 –425
Other fi nancing activities 30 –43 –143
Cash fl ow from fi nancing activities –5,405 –832
Effect of exchange rate changes on cash and cash equivalents 35 29
Net change in cash and cash equivalents –1,195 –989
Cash and cash equivalents at beginning of year 18 3,506 2,311
Cash and cash equivalents at end of year 18 2,311 1,322
GROUP
14 STENA AB FINANCIAL REPORT 2016
Basis of preparation
The consolidated fi nancial statements have been prepared in accord-
ance with International Financial Reporting Standards (IFRS) as adopted
by the EU. In addition, the Swedish Financial Reporting Board’s recom-
mendation RFR 1 Supplementary Accounting Rules for Groups has
been applied.
In accordance with IAS 1, the companies of the Stena Group apply
uniform accounting policies, irrespective of local legislation. The poli-
cies below have been applied consistently for all the years covered by
this Financial Report.
IAS 33 Earnings Per Share has not been applied, as Stena AB is not a
listed company.
The Parent company’s fi nancial statements have been prepared
according to the same accounting policies applied for the Group
except for the exceptions described in the section “Parent Company’s
accounting policies”.
The annual accounts and consolidated fi nancial statements are
approved for issue by the Board of Directors on 28 April 2017. The
balance sheets and income statements will be presented for adoption
by the Annual General Meeting on 28 April 2017.
In preparing these fi nancial statements, senior management has
made estimates and assumptions which affect the carrying amounts
of assets, liabilities and contingent liabilities at the reporting date and
recognised income and expense. The actual future outcome of specifi c
transactions may differ from the outcome estimated at the date of
preparation of these fi nancial statements. Differences of this type will
impact the outcome of fi nancial statements in forthcoming accounting
periods. Areas involving a high degree of assessment, which are com-
plex or for which the assumptions and estimates are of material signifi -
cance to the consolidated fi nancial statements are stated in Note 2.
Assets and liabilities are measured at historical cost, apart from
certain fi nancial assets and liabilities and investment properties which
are measured at fair value and ports which are recognised according to
the revaluation model. Financial assets and liabilities measured at fair
value consist of derivative instruments, fi nancial assets at fair value
through profi t or loss and available-for-sale fi nancial assets.
New or amended reporting standards 2016
During the year 2016, no new or amended IFRS Standards have had
any impact on the Group´s accounting.
Basis of consolidation
The consolidated fi nancial statements have been prepared in accordance
with the principles set out in IFRS 10 Consolidated Financial Statements
and include Stena AB and all subsidiaries, defi ned as companies in
which Stena AB, directly or indirectly, owns shares representing more
than 50% of the voting rights or has some other form of control. For
companies acquired or divested during the year, the following applies:
• Companies acquired during the year are included in the
consolidated income statement from the date on which control
was obtained.
• Companies divested during the year are included in the consolidated
income statement until the date on which Stena’s control ceases.
The Group’s consolidated fi nancial statements include the fi nancial
statements for the Parent company and its directly or indirectly owned
subsidiaries after:
• elimination of intercompany transactions and
• depreciation/amortisation of acquired surplus values
Consolidated equity includes equity in the Parent company and the
portion of equity in the subsidiaries arising after the acquisition.
Acquisitions of non-controlling interests are recognised in equity as
a separate category. Non-controlling interests’ share of profi t/loss for
the year is specifi ed after net profi t/loss for the year in the income
statement.
Business combinations and goodwill
All business combinations are accounted for in accordance with the
acquisition method. The method requires measurement of the assets,
liabilities and contingent liabilities owned by the acquiring company at
the acquisition date to determine their cost of acquisition on consolida-
tion. The acquisition method requires use of estimates. The valuation
of acquired land, buildings and equipment is carried out either by an
external party or by an internal party on the basis of available market
information. The reporting of fi nancial assets and liabilities, as well as
inventories, is based on available market information. The fair value of
signifi cant intangible assets is determined either with the help of inde-
pendent valuation experts or internally, through the use of generally
accepted valuation methods, which are usually based on future cash
fl ows.
Acquisitions of investment properties and vessels, in companies with
only assets, are accounted for as an asset deal.
In the event that the cost of acquisition exceeds the market value of
the identifi ed assets, liabilities and contingent liabilities, the difference
is accounted for as goodwill.
In the event that the fair value of the acquired net assets exceeds
the cost of acquisition, the acquirer shall identify and measure the
acquired assets again. Any remaining surplus in a revaluation shall be
immediately recognised as income. The acquisition analysis (the
method used to allocate cost of acquisition to acquired identifi ed net
assets and goodwill), shall, in accordance with IFRS, be completed
within twelve months of the acquisition date. Once the acquisition
analysis has been reviewed and approved by management, goodwill is
allocated to cash generating units and impairment testing is carried
out at least annually from the date on which this allocation is com-
pleted. If the acquisition is achieved in stages, goodwill is determined
on the date when control is obtained. Previous shares are measured at
fair value and the change in value is accounted for in the Income state-
ment. Goodwill is not amortised.
Transaction costs, apart from those attributable to equity or liability
instruments, are recognised as an expense in the income statement.
For acquisitions before 1 January 2010, transaction costs have been
capitalised. A contingent consideration is reported according to the
NOTES Amounts are shown in MSEK unless otherwise stated.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
STENA AB FINANCIAL REPORT 2016 15
acquisition date fair value. If the contingent consideration is classifi ed
as an equity instrument, no revaluation is carried out and the adjust-
ment is reported in equity. Other contingent considerations are
revalued each quarter and the difference is reported in the income
statement.
Investments in associates, joint ventures
and other joint arrangements
IFRS 12 requires enhanced disclosures regarding subsidiaries, joint
ventures, associates and unconsolidated structured entities in which
the company is involved.
Associates are companies in which the Group has a signifi cant infl u-
ence but not control, which as a rule applies to shareholdings equiva-
lent to between 20% and 50% of the votes, or over which the Group
in some other way exercises signifi cant infl uence.
Joint arrangements are companies over which the Group, through
collaboration agreements with one or more parties, has joint control
with external parties (the arrangement’s relevant activities). Invest-
ments in joint arrangements are classifi ed either as a joint operation or
a joint venture depending on the contractual rights and obligations of
each investor. Stena has assessed its joint arrangements and estab-
lished that the majority are joint ventures. One joint operation has
been identifi ed but is not considered to be of a material nature. Joint
operations are accounted for using proportionate consolidation.
Investments in associates and joint ventures are accounted for using
the equity method. The method requires the investment to be initially
recognised at cost. The carrying amount is subsequently increased or
reduced to refl ect the owner company’s share of the profi t or loss of
the associate/joint venture following the acquisition. In the consoli-
dated balance sheet, the holdings are reported as “Investments
reported according to the equity method”. In the consolidated income
statement, associates and joint ventures are divided according to stra-
tegic holdings and other holdings, with strategic holdings reported as
“Profi t/loss from investments in associates” within fi nancial net and
other holdings reported within each business area under operating
profi t. Dividends received are set off against the carrying amount of
each participation. At the end of each reporting period, the Group
assesses whether there is any objective evidence of impairment of the
investments. If this is the case, the Group calculates the impairment
amount as the difference between the associate’s recoverable amount
and the carrying amount and reports the amount under “Result from
investments in associates” or under operating profi t depending on
whether the holding is classifi ed as a strategic holding or other
holding.
For holdings in joint operations, the assets, liabilities, revenues and
costs that are associated with these holdings in the business are
reported according to the accounting principles applicable to these
specifi c assets, liabilities, revenues and costs.
Acquisitions of non-controlling interests
Acquisitions of non-controlling interests arise when less than 100% is
acquired. This type of acquisition is reported as a proportion of the
acquired net assets. The acquisition is reported as a transaction within
equity i.e., between the owner of the Parent company and the non-
controlling interests. Consequently, no goodwill arises from this type
of transaction. Changes to holdings of non-controlling interests are
based on the proportionate share of net assets.
Translation of foreign operations
The functional currency and reporting currency of the Parent company
and the reporting currency of the Group is the Swedish krona (SEK).
All foreign subsidiaries report in their functional currency, which is the
currency used in the companies’ primary economic environment. On
consolidation, all balance sheet items have been translated into SEK at
the closing rate of exchange. Profi t/loss items have been translated
using average exchange rates.
Transactions in foreign currency
Foreign currency transactions are converted to the functional currency
at the exchange rate prevailing on the transaction day. The functional
currency is the currency of the primary economic environment in which
the company generates and expends cash. Monetary assets and liabili-
ties in foreign currencies are converted to the functional currency at the
exchange rate prevailing on the closing date. Exchange differences
which arise are reported in the income statement. Non-monetary assets
and liabilities, which are reported at historical cost, are revaluated at the
transaction date. Non-monetary assets and liabilities which are reported
at fair value, are revalued to the functional currency at the exchange
rate prevailing at the revaluation date.
Segment reporting
Operating profi t is reported in a manner consistent with the internal
reporting submitted to the chief operating decision-maker. The chief
operating decision-maker is the function responsible for the allocation
of resources and the assessment of the operating segments’ results. In
the Group, this function has been identifi ed as Stena AB’s Board of
Directors, which make strategic decisions.
The Group’s segments, which are its business areas, have imple-
mented systems and procedures to support internal control and report-
ing. This forms the basis of the identifi cation of primary risks and the
varying returns that exist in the business, and is based on the various
business models for the Group’s end clients. The segments are responsi-
ble for operating profi t/loss, EBITDA (operating profi t before deprecia-
tion, amortisation and impairment) and the assets used in their opera-
tions, while fi nancial net, taxes and equity are not reported per
segment. Operating profi t/loss and assets for the segment are consoli-
dated in accordance with the same principles as the Group as a whole.
Sales between segments take place at market conditions and at market
prices. The Stena Group’s business areas and, thereby, its segments are:
• Ferry Operations
• Offshore Drilling
• Shipping
• Property
• New Businesses
GROUP
16 STENA AB FINANCIAL REPORT 2016
Revenue recognition
Revenue includes the fair value of the consideration received or receiv-
able for goods and services sold in the Group’s operating activities.
Revenue is recognised excluding VAT, returns and discounts and after
elimination of internal Group sales.
The Group recognises revenue when the amount can be measured
reliably, it is probable that future economic benefi ts will be generated
to the Company and specifi c criteria have been fulfi lled for each of the
Group’s operations. Revenue amounts are not considered to be reliably
measurable until all sales commitments have been met or have expired.
The Group bases its judgements on historical outcomes, taking into
consideration the type of client, type of transaction and special circum-
stances in each individual case.
The Group’s shipping and drilling revenues are derived from charter
contracts. Revenue is recognised on a straight-line basis over the
charter period. Provisions are made in advance for any ongoing loss
contracts.
Revenue from the Group’s ferry operations consists of ticket sales,
onboard sales, and freight revenues and are recognised in the period
in which the services are rendered.
Rental income from the investment property operations is derived
from leases and is recognised on a straight line basis over the lease term.
Sales of goods are recognised at the date on which a Group com-
pany sells a product to a customer in accordance with the terms of
sale. Sales are usually paid for in cash or by credit card.
Contract assignments in progress from operations within the
Adactum Group are recognised according to the percentage of com-
pletion method for all contracts whose outcome can be calculated in a
satisfactory manner. Revenue and costs are recognised in the income
statement by reference to the stage of completion. The stage of com-
pletion is determined on the basis of accrued assignment costs in rela-
tion to the estimated costs for the entire assignment. Anticipated
losses are expensed immediately.
Customer Loyalty Programmes relate to the accounting by Stena
Line and Blomsterlandet, which operate customer loyalty programmes
under which the customer can redeem credits for awards such as free
or discounted goods or services. The fair value of the total considera-
tion received in the initial sales transaction is allocated between the
award credits and the sale of the goods or services. The revenue
related to the award credits granted is recognised in the income
statement when the risk of a claim being made expires.
Sales of vessels and investment property are recognised in other
income. Revenue is recognised when all signifi cant risks and rewards
have been transferred to the buyer.
Interest income is recognised over the relevant period using the
effective interest method.
Dividend income is recognised when the right to receive payment
has been established and reported in fi nancial net.
Property, plant and equipment
Property, plant and equipment is recognised in the balance sheet
when, on the basis of available information, it is likely that future
economic benefi ts associated with ownership will fl ow to the Group
and the cost of the asset can be measured reliably.
Ports are carried at revalued amounts according to the revaluation
model in IAS 16, being their fair value at the revaluation date less
subsequent depreciation and impairment. If a port's carrying amount
increases as a result of a revaluation, the increase is recognised in other
comprehensive income and accumulated in equity under the transla-
tion reserve. A decrease arising as a result of a revaluation is recog-
nised in the income statement.
Vessels, windmills, equipment and buildings used in business opera-
tions are recognised at cost less accumulated depreciation and any
impairment losses. Acquisition expenditure is capitalised on acquisi-
tion. Repairs and maintenance costs for property, plant and equipment
are charged to the income statement for the year.
Dry-docking costs for vessels are capitalised and amortised over a
period of two to fi ve years.
For vessels, the company uses appraisals carried out by independent
vessel brokers for impairment assessment. If a review indicates that the
net carrying amount of an asset exceeds its recoverable amount, dis-
counted cash fl ows based on estimated capital expenses and estimated
future returns are used. Assets having a direct joint income, e.g. a ferry
route, are defi ned as the smallest cash-generating unit. If impairment
exists on the balance sheet date, the recoverable amount of the asset
is estimated and the asset is written down to this value. Impairment is
reversed if any change is made to the calculations used to determine
the recoverable amount.
Construction in progress includes advance payments, as well as
other direct and indirect project costs, including fi nancial cost, which
are capitalised on the basis of the actual borrowing cost. Buildings
used in business operations are divided into land and buildings, and
refer to properties used by the company in its own operations. Items of
property, plant and equipment are depreciated according to plan on a
straight-line basis. The residual values and useful lives of the assets are
tested on every balance sheet date and adjusted when needed. Depre-
ciation is not applied to land.
The residual values are estimated at zero. All assets are divided into
components.
Depreciation takes place from the date on which the asset is ready
for use and over the estimated useful lives as follows:
Vessels
Drilling rigs 20 years
Drilling rig vessels 20 years
Crude oil tankers 20 years
RoRo vessels 20 years
RoPax vessels 20 years
Superferries 20 years
LNG carriers 20 years
HSS vessels and other high speed vessels 10–20 years
Other non-current assets
Buildings 50 years
Port terminals 20–50 years
Windmills 20 years
Equipment 3–10 years
CONT. NOTE 1
STENA AB FINANCIAL REPORT 2016 17
Investment property
Investment property is reported at fair value in accordance with the fair
value model in IAS 40. Investment property, that is properties held in
order to generate rental income or increase in value or a combination
of these, is valued continuously using the fair value model (estimated
market value). These properties are initially measured at cost. Fair value
is based on the estimated market value on the balance sheet date,
which means the value at which a property could be transferred
between knowledgeable parties that are independent of each other
and have an interest in the transaction being carried out. Changes in
fair value are reported in the income statement, with an impact on
changes in value of properties.
The term investment property, which mainly includes residential and
offi ce buildings, also includes land and buildings, land improvements
and permanent equipment, service facilities etc. in the building or at
the site.
Property sales and purchases are recognised when the risks and
rewards of ownership are transferred to the buyer from the seller, which
normally takes place on the completion date as long as this does not
confl ict with the conditions of the sales contract.
Gains or losses on the sale or disposal of investment properties are
composed of the difference between the net proceeds from sale and
the most recently determined valuation (carrying amount based on the
most recently determined revaluation to fair value). Income arising
from sales or disposals is reported in the income statement as gains/
losses on sale of non-current assets.
In the event that Stena utilises a portion of a property for its own
administration, such a property will only be considered to be an invest-
ment property if an insignifi cant portion is used for administrative
purposes. In any other case, the property will be classifi ed as a building
used in business operations, and be accounted for in accordance with
IAS 16 Property, plant and equipment.
Subsequent costs are included in the carrying amount only when it is
likely that future economic benefi ts associated with the asset will accrue
to the company and the cost can be measured reliably. Other expenses
are recognised as costs in the period in which they arise. One decisive
factor in assessing when subsequent costs may be included in the carry-
ing amount is whether the expense refers to the replacement of identi-
fi ed components, or parts of these, in which case the costs are capital-
ised. Costs relating to the construction of new components are also
included in the carrying amount.
The valuation of investment properties at fair value (assessed market
value) utilises an internal valuation model which has been quality
assured by reconciling the assumptions with external property valuers,
and through external valuation. The internal valuation is determined on
an earnings basis, which means that each individual property’s net
rental income is divided by the required return by market yield for the
property in question. Assumptions have been made in the calculation
of net rental income regarding operating and maintenance expenses,
as well as vacancies. These assumptions are based on market assump-
tions of those cash fl ows. However, historical outcome, budget and
normalised costs have been a part of these assumptions. Different
required returns have been utilised for different markets and types of
properties.
Intangible assets
Goodwill
Goodwill is the amount by which the cost exceeds the acquisition date
fair value of the Group’s share of the acquired subsidiary’s identifi a-
ble net assets. Goodwill on the acquisition of subsidiaries is recog-
nised as an intangible asset. Goodwill is tested annually for impair-
ment and is recognised at cost less accumulated impairment losses.
Goodwill impairment is not reversed. A gain or loss on the disposal
of an entity includes the residual carrying amount of the goodwill
that relates to the entity.
Goodwill is allocated to cash-generating units during impairment
testing. This allocation refers to those cash-generating units, deter-
mined in accordance with the Group’s operating segments, which
are expected to benefi t from the business combination in which the
goodwill item arose.
Trademarks
Trademarks are assessed as having an indefi nite useful life and are
carried at cost less previous amortisation and any impairment losses.
Trademarks are tested for impairment annually.
IT investments
Acquired software is capitalised on the basis of acquisition and imple-
mentation costs. These costs are amortised over the asset’s useful life,
which is judged to be between three and fi ve years, in accordance with
the straight-line method. Useful life is reviewed on a yearly basis.
Distribution agreements
Distribution agreements are reported at cost less accumulated amortisa-
tion. Amortisation takes place according to the straight-line method over
the asset’s estimated useful life of 5 years. Useful life is reviewed on a
yearly basis.
Rights to routes
Rights to routes are capitalised on the basis of acquisition and amor-
tised over the asset’s useful life, which is judged to be 20 years, in
accordance with the straight-line method. Useful life is reviewed on
a yearly basis.
Maintenance of intangible assets
Expenses for maintenance of intangible assets are expensed as they
arise.
Impairment of non-fi nancial assets
Assets with indefi nite useful lives, goodwill and trademarks, are not
amortised; instead, they are tested annually for impairment. Assets
that are amortised are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable. Impairment is the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount is the
higher of the asset’s fair value, less costs to sell, and its value in use. In
the assessment of impairment requirements, assets are grouped at the
lowest level at which there exist separate identifi able cash fl ows
(cash-generating units).
GROUP
18 STENA AB FINANCIAL REPORT 2016
Non-fi nancial assets other than goodwill and trademarks for which
impairment losses have previously been recognised are tested at each
reporting date to determine whether there is any need for reversal of
the previous impairment.
Borrowing costs
Borrowing costs that are attributable to the construction of qualifying
assets are capitalised as part of the cost of the qualifying asset. A qual-
ifying asset is an asset which necessarily takes a signifi cant amount of
time to prepare for its intended use. Borrowing costs incurred on loans
that are specifi c to the qualifying asset are capitalised.
Accounting for subsidies
Any subsidies (government grants) received in conjunction with new
acquisitions of vessels, properties or port installations are recognised
as a reduction of cost, while subsidies relating to operating activities
reduce the corresponding costs. Recognition takes place when the
subsidy can be estimated reliably. For Swedish-fl agged vessels
employed in international shipping activities, the company has received
subsidies equal to all security costs and income taxes payable by the
employers on behalf of employees who work on board such vessels.
The amounts received have reduced personnel costs.
Non-current assets held for sale
Non-current assets are classifi ed as available-for-sale when their carry-
ing amounts will be recovered primarily through a sales transaction
and a sale is considered highly probable. They are recognised at the
lower of carrying amount and fair value less costs to sell if their carry-
ing amount will be recovered primarily through a sales transaction and
not through continuous usage.
Financial assets and liabilities
General
A fi nancial instrument is any form of agreement giving rise to a fi nan-
cial asset in one company and a fi nancial liability or equity instrument
in another company. Financial assets in the consolidated balance sheet
consist of cash and cash equivalents, trade receivables, other fi nancial
assets, shares and derivative assets. Financial liabilities arise from claims
for repayment of cash or of other fi nancial assets. In the consolidated
balance sheet, fi nancial liabilities consist of trade payables, loans,
fi nance leasing liabilities, bonds and derivative liabilities.
Reporting
Financial assets and liabilities are reported in the balance sheet when
the Group becomes party to the instrument’s contractual terms. Finan-
cial assets and liabilities are reported on the settlement date, with the
exception of derivatives, which are reported on the trade date. Financial
instruments are initially recognised at fair value, which normally corre-
sponds to the cost of acquisition at the acquisition date. Transaction
costs are included in the cost of all fi nancial instruments not measured
at fair value in the income statement. Netting of fi nancial liabilities and
assets only takes place when there is a contractual possibility and when
the intention is to offset the gross amounts of the liabilities or assets.
Finance costs
Finance costs are reported in the period in which they arise. Finance
costs regarding new construction projects of vessels and properties are
capitalised as a portion of the cost of acquisition. Costs of fi nancing
long-term loans and credits are deferred and amortised over the
expected term of the fi nancing.
Derecognition
Financial assets are derecognised from the balance sheet when the
contractual rights to cash fl ows have expired or been transferred and
when essentially all the risks and rewards of ownership of the fi nancial
asset have been transferred. Financial liabilities are derecognised from
the balance sheet when they have been extinguished. Realised result is
defi ned as proceeds from sales less the net carrying amount as at the
previous year end.
Classifi cation of fi nancial assets
Financial assets in the Group are divided into the following categories:
• Financial assets at fair value through profi t or loss
– held for trading
– designated (assets classifi ed on acquisition as fi nancial assets at fair
value through profi t or loss)
• Financial assets held for hedging purposes
• Held-to-maturity fi nancial assets
• Available-for-sale fi nancial assets
• Loans and receivables
Classifi cation is based on the purpose of the acquisition of the fi nancial
instrument. The classifi cation is carried out by senior management at
the initial recognition date.
Financial assets at fair value through profi t or loss
Financial assets belonging to this category are measured and continu-
ously reported at fair value through profi t or loss.
The category is divided into two subcategories:
1) held for trading and 2) designated (assets classifi ed on acquisition
as fi nancial assets at fair value through profi t or loss) held for trading
consists of fi nancial assets acquired with the primary intention of being
sold in the short term and those derivative instruments to which hedge
accounting is not applied. Trading shares are classifi ed as short-term
investments in the balance sheet and changes in fair value are reported
in the income statement under gains/losses on sale of securities.
The fair value option is applied based on how the investments are
managed and the fact that their performance is evaluated on a fair
value basis in line with the Group’s investment policy. These assets are
classifi ed as Marketable securities in the balance sheet and changes in
fair value are reported in the income statement under gains/losses on
sale of securities. Internally, the Group follows up and reports on
these assets on the basis of their fair values and, consequently, con-
siders that this valuation and recognition in the income statement and
balance sheet provides readers of the Financial Report with the most
relevant information.
CONT. NOTE 1
STENA AB FINANCIAL REPORT 2016 19
Financial assets, classifi ed as fi nancial assets at fair value through
profi t or loss at the acquisition date, are classifi ed as current assets if
they are expected to be realised within 12 months of the balance
sheet date.
Held-to-maturity fi nancial assets
Held-to-maturity fi nancial assets are non-derivative fi nancial assets
with fi xed or determinable payments and fi xed maturities that the
Group’s management has the positive intention and ability to hold to
maturity. If the Group were to sell more than an insignifi cant amount
of held-to-maturity fi nancial assets, the whole category would be
tainted and reclassifi ed as available for sale. Held-to-maturity assets
are measured at amortised cost. Held to maturity fi nancial assets are
included in non-current assets, except for those with maturities less
than 12 months from the balance sheet date, which are classifi ed as
current assets.
Assets in this category are recognised as marketable securities.
Loans and receivables
Loans and receivables are fi nancial assets that are not designated as
derivatives, that have fi xed or determinable payments and that are not
quoted in an active market. Receivables are reported under current
assets, with the exception of receivables with a maturity date later
than 12 months after balance sheet date which are classifi ed as
non-current assets. Loans and receivables and are listed in the balance
sheet under other receivables and trade receivables. Assets in this
category are measured at amortised cost, with allowances for bad
debt losses and loan losses, when applicable.
Available-for-sale fi nancial assets
Investments in certain shares (with the exception of participations in
subsidiaries and associates) and bonds are categorised as available-
for-sale fi nancial assets. Period changes in fair value, with the excep-
tion of impairment charges, are reported in other comprehensive
income for these instruments. When these fi nancial instruments are
sold, the accumulated gains or losses are reclassifi ed through other
comprehensive income and are recognised in the income statement.
These assets are classifi ed as marketable securities in the balance sheet
and changes in market value are reported in the fair value reserve in
other comprehensive income.
Assets in this category are recognised as other long-term securities,
other non-current assets and investments in securities.
Receivables and liabilities in foreign currency
Transactions in foreign currency are translated in accordance with
current exchange rates at the transaction date.
Both in the individual Group companies and in the Group’s annual
accounts, receivables and liabilities in foreign currency are translated
at the closing rate of exchange. Related exchange rate differences on
current payments are included in operating profi t, while differences in
fi nancial receivables and liabilities are reported under fi nancial items. All
exchange rate differences affect net profi t/loss for the year.
An exception is the portion of the difference consisting of an effec-
tive hedge of the net investment, where recognition is directly in other
comprehensive income.
Translation differences on non-monetary fi nancial assets and liabili-
ties, such as equities held at fair value through profi t or loss, are recog-
nised in the income statement as part of the fair value gain or loss.
Translation differences on non-monetary fi nancial assets, such as equi-
ties classifi ed as available for sale, are included in the available-for-sale
reserve in other comprehensive income.
The following currency exchange rates have been applied in the
Group’s annual accounts:
Average rates
2015 2016Change in
%
USD 8.4350 8.5613 1
GBP 12.8962 11.5664 –10
EUR 9.3562 9.4704 1
Closing rates
2015 2016Change in
%
USD 8.4412 9.1061 8
GBP 12.4390 11.2369 –10
EUR 9.1688 9.5769 4
Financial liabilities
Financial liabilities in the Group are divided into the following
categories:
• Financial liabilities at fair value through profi t or loss,
held for trading
• Other fi nancial liabilities
Classifi cation is based on the purpose of the acquisition of the fi nancial
instrument. The classifi cation is carried out by senior management on
the initial recognition date.
Other fi nancial liabilities
Other fi nancial liabilities in the balance sheet consist of senior notes,
other non-current interest-bearing liabilities, other non-current liabilities,
current interest-bearing liabilities, trade payables and other liabilities.
Financial liabilities are recognised initially at fair value, net of trans-
action costs incurred. Financial liabilities are subsequently stated at
amortised cost; any difference between the proceeds (net of transac-
tion costs) and the redemption value is recognised in the income
statement over the period of the liabilities using the effective interest
method.
The liabilities in the balance sheet, non-current and current liabilities
and senior notes, are initially reported at fair value, net of transactions
costs and, subsequently, at amortised cost. Transaction costs initially
decrease the debt and is thereafter allocated over time using the effec-
tive interest method.
GROUP
20 STENA AB FINANCIAL REPORT 2016
Loan amounts are reported as liabilities in the balance sheet, with
liabilities with a term of over 12 months being reported as non-current
and all others as current.
The early redemption of liabilities reduces the outstanding liabilities
by a nominal principal loan amount. Any premiums or discounts are
taken up as income.
Derivative fi nancial instruments and hedge accounting
The Group hedges oil price risk, cash fl ow interest rate risk and foreign
exchange risk related to net assets in foreign operations as well as in
highly probable forecast transactions in foreign currency. The Group
uses options and swaps to hedge oil price risk and interest rate swaps
to hedge interest rate risk and foreign currency forward contracts to
hedge foreign exchange risk.
Derivatives are initially recognised at fair value on the date a
derivative contract is entered into and are subsequently remeasured at
their fair value. The method of recognising the resulting gain or loss
depends on whether the derivative is designated as a hedging instru-
ment, and if so, the nature of the item being hedged. The Group
designates certain derivatives as either:
a) hedges of a particular risk associated with a recognised asset or
liability or.
b) a highly probable forecast transaction (cash fl ow hedge) or.
c) hedges of a net investment in a foreign operation (net investment
hedge).
The Group documents at the inception of the transaction the relation-
ship between hedging instruments and hedged items, as well as its risk
management objectives and strategy for undertaking various hedging
transactions. The Group also documents its assessment, both at hedge
inception and on an ongoing basis, of whether the derivatives that are
used in hedging transactions are highly effective in offsetting changes
in fair values or cash fl ows of hedged items. The effectiveness of a
hedge has to be in the range of 80%–125%.
Currency swap agreements are valued at market rates, unrealised
exchange gains are recognised in the balance sheet as current receiva-
bles, and unrealised exchange losses are presented as current liabilities.
The fair values of various derivative instruments used for hedging
purposes are disclosed in Note 32. Changes in the hedging reserve in
other comprehensive income are shown in the consolidated statement
of changes in equity and in other comprehensive income. The full fair
value of a hedging derivative is classifi ed as a non-current asset or
liability when the remaining hedged item is more than 12 months.
Cash fl ow hedging
The hedged item consists of a highly probable forecast consumption of
bunker fuels, highly probable forecast cash fl ow in foreign currencies
and the fl oating interest rate cash outfl ows of issued debt instruments.
The Group is exposed to the price of bunker fuels for vessel operations
and uses a fi xed price contract, swaps and options to hedge its oil price
risk. Hedging contracts are regularly entered into, so as to match the
underlying cost of delivery of bunker fuel. Hedging instruments (oil
options and futures in the case of bunker hedges and interest rate
swaps in cash of interest rate hedges), which are an effective hedge,
are measured at fair value with changes in fair value regarding the
hedged risk reported through other comprehensive income and is
cumulated in the hedge reserve until the hedged item affects the
income statement, that is, when the purchase takes place or when the
interest rate payment is made. For the Stena Group’s hedges of oil
price risk in bunker-oil (bunker hedges), the cash fl ow interest rate risk
in fl oating rate debt and foreign currency risk in highly probable fore-
cast purchase and/or sales transactions, cash fl ow hedge accounting is
applied. In conjunction with the purchase, when the accumulated fair
value of the hedging instruments is removed from the hedging reserve
and is reclassifi ed through other comprehensive income it is, reported
in item direct operating expenses in the income statement as an
adjustment of the cost of bunker fuel for the current period or as part
of interest rate expense in cash of interest rate hedges.
Positive or negative fair values of the derivatives are accounted for
as other non-current assets or other non-current liabilities. The current
portion of the hedged item is accounted for as other current receiva-
bles or other current liabilities.
The accounting for cash fl ow hedges of interest rate risk and foreign
currency risk in highly probable forecast transactions in foreign cur-
rency follows the same principles as the above described policy for the
bunker hedges.
Changes in fair value of the hedging instruments are accounted
for through other comprehensive income and are accumulated in the
hedging reserve. The cumulative changes in fair value are reclassifi ed
through other comprehensive income into the income statement in the
same period as the hedged items affect the income statement and are
presented in the same line item as the hedged item.
It is Group’s policy that duration and dates of maturity for fi nancial
instruments which are held and classifi ed as hedge contracts for inter-
est and FX exposure should correspond with the underlying exposure’s
dates of maturity.
Results of operations from all types of fi nancial derivative instru-
ments, with the exception of those contracts referring to fi nancial
trading, are reported as an adjustment of the revenue or costs for the
period and for those transactions the contracts are designated to
hedge.
When hedge accounting is terminated and the hedged item is
expected to occur, the hedge item is recognised in the income state-
ment. The change in fair value is then reclassifi ed through other com-
prehensive income into the income statement.
If an underlying asset or liability is sold or redeemed, the pertaining
fi nancial instruments are market-valued and the result is reported as an
adjustment of the market or redemption value of the underlying asset
or liability.
Hedging of net investments
Hedging of net investments in foreign operations is reported in the
same manner as cash fl ow hedges. The gains or losses attributable to
the effective portion of the hedge are reported through other compre-
hensive income and accumulated in the translation reserve. Gains or
losses attributable to the ineffective portion of the hedge are directly
reported in the income statement as fi nancial items.
CONT. NOTE 1
STENA AB FINANCIAL REPORT 2016 21
Accumulated gains or losses are reclassifi ed through other compre-
hensive income and reported in the income statement when the
foreign operations, or portions of these operations, are sold.
Fair value determination of fi nancial instruments
measured at fair value in the balance sheet
(i) Financial instruments quoted in an active market
(level 1 measurement)
For fi nancial instruments quoted in an active market, fair value is
determined on the basis of the asset’s listed buying current bid-rate
on balance sheet date, with no addition for any transaction costs (for
example brokerage) on acquisition date. A fi nancial instrument is
considered to be quoted in an active market if the quoted prices are
readily available on a stock exchange, with a trader, broker, industry
organisation, company providing current price information or super-
visory authority, and if these prices represent actual and regular market
transactions carried out under arm’s length conditions. Any future
transaction costs from disposals are not considered. The fair value of
fi nancial liabilities is determined on the basis of the listed selling rate.
ii) Valuation techniques using observable market inputs
(level 2 measurement)
If the market for a fi nancial instrument is not active, the Group
determines fair value by utilising a valuation technique. The valuation
techniques employed are based, as far as possible, on market informa-
tion, with company specifi c information being used to the least extent
possible. The Group calibrates valuation techniques at regular intervals
and tests their validity by comparing the outcome of these valuation
techniques with prices from observable current market transactions
in the same instruments. The valuation models applied are calibrated
so that fair value on the initial recognition date amounts to the trans-
action price, with changes in fair value subsequently being continu-
ously reported on the basis of changes in the underlying market risk
parameters.
(iii) Valuation techniques using signifi cant unobservable inputs
(level 3 measurement)
If there are no similar fi nancial instruments on a quoted market and
no observable pricing information from the market, the valuation is
based on estimated discounted cash fl ows. Fair value is determined by
hypothesising what a market price would be if there was a market i.e.
calculated fair value is a prediction instead of an observation.
Offsetting of fi nancial instruments
Financial assets and liabilities are reported at gross amounts in the
balance sheet. See Note 32 for information about fi nancial instruments
subject to offsetting, i.e., where there is a legal right to offset the
recognised amount or there is an intention to simultaneously realise
the asset and liability.
Impairment of fi nancial assets
The Group assesses on each balance sheet date whether there exists
any objective evidence that impairment existsfor a fi nancial asset or a
group of fi nancial assets. For shares classifi ed as available-for-sale
assets, any signifi cant or prolonged decline in the fair value of a share
to a level below its cost of acquisition is regarded as an indication of
impairment.
If such evidence is present for available-for-sale fi nancial assets, the
accumulated loss – calculated as the difference between cost and the
current fair value, less any previous impairment charges reported in
the income statement – is reclassifi ed from equity to the income state-
ment. Impairment of equity instruments, which is reported in the
income statement, is not reversed through the income statement.
Reversal of impairment of bonds is recorded in the income statement
on the same line as the impairment. Bonds are impaired in the event
of the counterparty’s insolvency.
Income taxes
General
The Group’s total tax consists of current tax calculated on taxable
profi t and deferred tax. Current tax and changes in deferred tax are
reported in the income statement, with the exception of those
deferred taxes reported directly in other comprehensive income.
Deferred tax includes unutilised defi cits from the translation of tax
assessment to current tax rates, and other temporary differences
between book residual value and fi scal residual value. The tax value of
unutilised loss carry-forward is capitalised to the degree it is probable
that this will entail lower tax payments in the near future.
Signifi cant assessments are required from management in the calcu-
lation of income tax liabilities, income tax receivables and deferred tax
for provisions and receivables. This process requires the assessment of
the Group’s tax exposure of current tax and the adoption of temporary
differences created by various taxation and accounting regulations. In
particular, management must assess the likelihood that deferred tax
assets can be settled against surpluses in future tax assessment see
also Note 2.
Current tax
All companies within the Group calculate income tax in accordance
with the tax regulations and ordinances in force in those countries
where the profi t is taxed.
Deferred taxes
The Group uses the balance sheet method to calculate deferred
taxes. The balance sheet method implies that deferred tax assets and
liabilities are valued according to the tax rates adopted or announced
on balance sheet date and which are expected to apply to the period
in which the acquisition is executed or the liability settled. The tax
rates are applied to the existing differences between the accounting
or fi scal value of an asset or liability, as well as to loss carry forwards.
These loss carry forwards can be used to reduce future taxable
income. Deferred tax assets are reported to the extent that it is prob-
able that a suffi cient taxable surplus will exist to allow for accounting
of such receivables.
GROUP
22 STENA AB FINANCIAL REPORT 2016
Leasing
Any leasing agreements in which the economic risks and rewards of
ownership are essentially transferred to the lessee are defi ned as
fi nance leases.
Assets held under fi nance leases are classifi ed in the consolidated
balance sheet as non-current assets. The commitment to pay future
minimum lease payments is reported as non-current and current liabili-
ties. The assets are depreciated according to plan, while lease pay-
ments are reported as interest and re
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